B. Temporary Restraining Order
A TRO should be granted only if the movant can show the existence of irreparable harm, the absence of an adequate remedy at law, a probability of success on the merits, that the threat of harm to the movant in the absence of a TRO outweighs the harm to the non-movant if an injunction issues, and that the public interest would not be disserved by the TRO. United States v. Phillips, 527 F. Supp. 1340 (N.D. Ill. 1981). Because we find it to be dispositive, we consider first whether the petitioners have demonstrated a likelihood of success on the merits.
Under the Illinois Motor Vehicle Franchise Act ("Act"), a car distributor such as Saab may not cancel or terminate a franchise agreement without good cause. 815 ILCS 710/4(d)(6).
Additionally, distributors or manufacturers violate the Act if they refuse to approve a proposal to transfer the franchise to a qualified buyer. 815 ILCS 710/4(e)(11).
We first consider whether the fraud perpetrated by Downtown constitutes "good cause" for terminating the franchise. Good cause exists where a franchisee fails to substantially comply with the franchise agreement or where the franchisee commits a breach of contract that affects the franchiser's ability to market its product. Kawasaki Shop of Aurora v. Kawasaki Motors Corp., 188 Ill. App. 3d 664, 544 N.E.2d 457, 463-64, 136 Ill. Dec. 4 (Ill. App. Ct. 1989) (adopting common law definition of "good cause" embodied in Dayan v. McDonald's Corp., 125 Ill. App. 3d 972, 466 N.E.2d 958, 974, 81 Ill. Dec. 156 (Ill. App. Ct. 1984)). Here, contrary to Downtown's version of events, Saab has submitted extensive evidence of widespread fraud implicating, among others, members of Downtown's current management. While an isolated incident by a rogue employee may not provide good cause for termination of a franchise, the ongoing deception outlined by Saab, including actions in direct violation of the franchise agreement, clearly support a finding of active participation by the petitioners.
Indeed, we find it inconceivable that the current management did not know of, and at least acquiesce in, the continued fraud at Downtown. Such behavior clearly falls within the realm of "good cause" for termination. Accordingly, we find that Downtown has virtually no chance of succeeding on the merits of its termination claim.
The other issue before us is whether Downtown is likely to succeed on its claim that Saab violated the IMVFA by refusing to approve, or even process, Downtown's proposed transfer of the franchise. As Saab points out, however, the IMVFA requires that a distributor notify a dealer sixty days prior to the effective date of termination, and grants a distributor sixty days to respond to a dealer's proposal to transfer its franchise. 815 ILCS 710/4(e)(6) & (11) (1993). Because Downtown did not submit a transfer proposal to Saab until after Downtown received notice that its franchise was being terminated, its ownership interest in the franchise necessarily expires before Saab is obligated to act on the proposed transfer. Accordingly, Downtown's likelihood of success on its transfer claim hinges on its chances of prevailing on its termination claim, which, as discussed above, are low. That is, if Downtown loses on the termination claim, it will no longer have any rights under the IMVFA, and consequently will be unable to enforce any transfer rights provided in the Act. Therefore, Downtown's likelihood of success on the merits of its transfer claim are, at best, negligible.
Because petitioners are unable to demonstrate a likelihood of success on the merits, we deny their petition for a temporary restraining order.
For the reasons set forth above, we dismiss plaintiffs David Snower and Emanuel Annerino from this action for lack of standing. In addition, plaintiffs' petition for a temporary restraining order is denied. However, their underlying request for a preliminary injunction remains. Accordingly, the parties are to proceed to Magistrate Judge Bucklo forthwith for an evidentiary hearing on the preliminary injunction. Magistrate Judge Bucklo is to file a Report and Recommendation with this court upon completion of the evidentiary hearing. A status hearing is set for December 3, 1993 at 10:00 a.m. It is so ordered.
MARVIN E. ASPEN
United States District Judge